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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the last few years Jaeren Sparebank (OB:JAEREN) has paid a dividend to shareholders. Today it yields 5.2%. Should it have a place in your portfolio? Let’s take a look at Jaerenrebank in more detail.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Jaerenrebank pass our checks?
The current trailing twelve-month payout ratio for the stock is 56%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 47% which, assuming the share price stays the same, leads to a dividend yield of 4.9%. However, EPS should increase to NOK13.92, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Jaerenrebank as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Jaerenrebank produces a yield of 5.2%, which is high for Banks stocks but still below the market’s top dividend payers.
Taking all the above into account, Jaerenrebank is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for JAEREN’s future growth? Take a look at our free research report of analyst consensus for JAEREN’s outlook.
- Valuation: What is JAEREN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether JAEREN is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.